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Indian stock market and companies daily report (April 30, 2013, Tuesday)
The Indian markets are expected to open in the green following strong start to SGX Nifty and major Asian indices after better-than-expected reading on US housing sales and amid speculation that central banks will continue the stimulation measures.
The US markets ended on a positive note on Monday with S&P 500 closing at a record high as traders reacted positively to the latest batch of economic news. The strength on Wall Street reflected a positive reaction to a report from the National Association of Realtors showing a bigger than expected rebound in pending home sales in the month of March. The pending home sales index rose by 1.5% in March 201 3 after falling by 1% in February 201 3. A separate report from the Commerce Department showed that personal spending climbed 0.2% in March 2013 following a 0.7% increase in February 2013.
Meanwhile in India, renewed hopes of an interest rate cut at the RBIRs.s monetary policy meet that is scheduled on May 3 helped stocks close higher on Monday. Going ahead, release of economic data points is likely to remain in focus on Tuesday, with traders likely to keep an eye on reports on home prices, consumer confidence, and Chicago-area business activity.
The trend deciding level for the day is 19,367 / 5,897 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,449 - 19,511 / 5,926 - 5,947 levels. However, if NIFTY trades below 19,367 / 5,897 levels for the first half-an-hour of trade then it may correct up to 19,305 - 19,222 / 5,876 - 5,847 levels.
HMCL reaches on a wage settlement agreement with Gurgaon union
According to media reports, Hero MotoCorp (HMCL) has finally arrived at a wage settlement agreement with the Gurgaon union. While the entire terms of the agreement are not fully disclosed, according to media sources, the company has agreed to hike wages of permanent workers by Rs.9,000 a month over a three year period taking effect retrospectively from August 2012. According to the agreement, in the first year, the workers will get a hike of Rs.5,400 and the remaining Rs.3,600 will to be divided equally over the next two years. Besides the wage hikes, the management has also agreed to offer other benefits and bonuses to the workers.
The workers at the Gurgaon unit have been agitating for higher wages in a peaceful manner since the past few months. As a mark of protest, the workers have been sporting black arm-bands at the workplace and had also stopped taking tea and snacks offered by the company. The company currently employs around 1,200 permanent workers and 4,000 contract workers at its Gurgaon facility. The Gurgaon facility accounts for ~30% of HMCLRs.s total annual installed capacity of ~7mn units.
We see this as a positive development for HMCL as amicable solution to the wage settlement dispute removes the uncertainty associated with the disruption of operations at the plant. Further the impact of the wage settlement agreement on companyRs.s profitability is unlikely to be material as we expect a marginal impact of upto 1 5bp on FY2014/15 operating margins. We retain our FY2014/1 5E earnings estimates for the company. At Rs.1,649, the stock is trading at 11.8x FY2015 earnings. We maintain our Accumulate rating on the stock with a target price of Rs.1,819.
Hindustan Unilever (CMP: Rs.465/ TP:-/ Upside:-)
HUL delivered healthy set of numbers for 4QFY2013. The companyRs.s top-line and bottom-line rose by 12.5% and 18.1% respectively. OPM stood at 13.7%, ahead of our estimates of 13.4%. The most positive aspect of the result is the 6% yoy volume growth posted by the company for the quarter. HUL managed to revive the volume growth by passing on some benefits of reduction in raw material costs to customers by way of price cuts and increased A&P expenditure. Soaps and Detergents segment grew by 12.6% yoy, led by key brands such as Dove, Lux, Lifebuoy, Rin and Surf. The high margin Personal Products segment rose by 12.1%. Beverages segment rose by 18.3% yoy. We maintain our Neutral recommendation on the stock.
Sterlite Industries (CMP: Rs.92/ TP: Rs.98/ Upside: 7%)
Sterlite Industries (Sterlite) reported better than expected 4QFY2013 results both on both top line and net profit front. Net sales increased 17.2% yoy to Rs.12,609cr above our estimate of Rs.11,334cr. Net sales growth was driven by increase in all the segments. Aluminium, Copper and Zinc segment revenues grew 9.8%, 16.9% and 21.6% yoy to Rs.953cr, Rs.5783cr and Rs.4,950cr, respectively. On the operating front, SterliteRs.s EBITDA grew 14.6% yoy at Rs.3,306cr and EBITDA margin was 26.2% (above our estimate of 23.1%) mainly due to higher profitability from all the segments and hence, adjusted net profit increased by 1 9.7% yoy to Rs.2,041cr, which was above our estimate of Rs.1,522cr. We maintain our Accumulate rating on the stock with a target price of Rs.98.
Bosch (CMP: Rs.8,995/ TP: -/ Upside: -)
Bosch (BOS) reported better-than-expected results for 1QCY2013 led by sequential expansion of 482bp in operating margins to 17.3% driven by a sharp 23.4% qoq decline in other expenditure. However, on a yoy basis the performance was impacted due to the ongoing slowdown in the automotive industry.
For 1QCY201 3, top-line posted a decline of 3.8% yoy to Rs.2,207cr as medium and heavy commercial vehicle and tractor segments of the automotive industry, the key drivers of the companyRs.s performance, witnessed a decline of 39% and 8.5% yoy respectively. As a result, the diesel systems segment of the company posted a decline of 13% yoy. While domestic sales declined 2.5% yoy, export sales posted a decline of 9.5% yoy during the quarter. On the operating front, EBITDA margin declined by a sharp 349bp yoy to 17.3% as employee and other expenditure as percentage of sales surged 210bp and 180bp yoy respectively. However, on a sequential basis, EBITDA margins improved 482bp led by lower other expenditure which benefitted from the cost reduction initiatives undertaken by the company. Hence, operating profit grew by a strong 43.5% qoq to Rs.382cr, significantly higher than our estimates of Rs.258cr. Led by a strong sequential operating performance, net profit posted a better-than-expected growth of 51% to Rs.260cr. Nonetheless, it declined 22.6% yoy largely due to contraction in operating margins.
While we are positive on the long term prospects of BOS due to its technological leadership and strong and diversified product portfolio, we expect the near-term environment to remain challenging given the continued slowdown in the domestic automotive industry. Nevertheless, current valuations of 20.5x CY2014E earnings, leaves limited room for any potential upside. Hence, we maintain our Neutral rating on the stock.
Exide Industries (CMP: Rs.135/ TP: Rs.146/ Upside: 8%)
For 4QFY2013, Exide Industries (EXID) operating performance was slightly ahead of our estimates led by expansion in EBITDA margins on account of the sustained momentum in the four-wheeler (4W) replacement battery segment. The top-line for the quarter grew broadly in-line with our estimates and stood at Rs.1,541cr (6% yoy and 5.3% qoq) led by continued traction in the 4W replacement battery segment. However, sluggish demand in the 4W and 2W OEM battery segments restricted further growth in the top-line. The growth in the industrial battery segment too remained healthy led by pick-up in the home UPS battery segment. On the operating front, EBITDA margins improved sharply by ~200bp qoq to 13.3%, which was slightly ahead of our estimates of 12.5%. The margin expansion was carried out purely due to the decline in other expenditure (7% qoq). As a percentage of sales, other expenditure declined 190bp sequentially. The raw-material and staff cost as percentage of sales however remained stable on a sequential basis. Consequently, net profit surged 40.7% qoq (2.8% yoy) to Rs.146cr as against our estimates of Rs.126cr. The net profit also benefitted from a sharp jump of 148.8% qoq (105.9% yoy) in other income to Rs.30cr. We shall revise our estimates and release a detailed result note post our interaction with the management during the earnings conference call. At Rs.135 the stock is trading at 15.2x FY2015 earnings. Currently, we maintain our Accumulate rating on the stock with a target price of Rs.146.
Bank of Maharashtra (CMP: Rs.56 / TP: Under Review)
Bank of Maharashtra reported stellar performance during the quarter, registering a bottom-line growth of 255.6% yoy, which was ahead of our expectation of 192.5% yoy growth. Strong NII growth (34.6% yoy, aided by similar growth in advance), robust non-interest income performance (more than double on a yoy basis) and flat provisioning expenses (on sequential improvement in asset quality and also due to high base), resulted in stellar earnings performance for the bank. Asset quality for the bank improved sequentially, as both Gross and net NPA levels declined by 1 1.4% and 19.3% qoq, respectively. At CMP, the stock trades at 0.6x FY2015x ABV. Post the recent surge in the stock, our target price has been achieved and hence our rating and recommendation on the stock is currently under review.
Hexaware (CMP: Rs.82 / TP:-/ Under review:- )
For 1QCY2013, Hexaware reported broadly in-line set of results with operating margins coming ahead of expectations. The USD revenue came in at US$94mn, up 1.8% qoq volume growth. In INR terms, revenue came in at Rs.508cr, up 1.1%. The companyRs.s EBITDA margin grew by ~240bp (estimate 190bp) qoq to 19.3% on account of considerable increase in utilization by ~550bp qoq to 70.3% and offshore effort shift. PAT came in at Rs.79cr, up 19.8% qoq.
Management has given 0-2% qoq USD revenue growth for 2QCY2013, which is lower than the expectation of 1-3%. We maintain our accumulate rating on the stock. The stock is currently under review and will be releasing a detailed result update shortly.
KPIT (CMP: Rs.98 / TP:-/ Under review:- )
KPIT Cummins Infosystems (KPIT) reported its 4QFY2013 results which were broadly in-line with our estimates on the revenue front but ahead on the operating front. The dollar revenues came in at US$105.5mn, up 2% qoq. In INR terms, revenues came in at Rs.569cr, up 1.2% qoq. EBITDA margin of the company expanded by 207bp qoq to 17.7%. For 4QFY2013, the company reported PAT of Rs.51cr, down ~15% qoq, while on a yoy basis the PAT grew 51.5%.
KPIT's USD revenue for FY2013 grew by 33%, exceeding management gudance of 32% and much ahead of industryRs.s FY2013 growth rate. For FY2014, management has cited guidance of 14-16%, which is encouraging. We maintain our buy rating on the stock. The stock is currently under review and will be releasing a detailed result update shortly.
Godrej Consumer (CMP: Rs.856/ TP: -/ Upside: -)
Godrej Consumer is expected to declare its 4QFY2013 results today. We expect the top-line to grow by 29.3% yoy to Rs.1,711cr. OPM is expected to increase by 18bp yoy to 18.9%. Bottom-line is expected to increase by 27.2% yoy to Rs.213cr. We maintain our Neutral recommendation on the stock.
Dabur India (CMP: Rs.147/ TP: -/ Upside: -)
Dabur is expected to declare its 4QFY2013 results today. We expect the top-line to grow by 15.9% yoy to Rs.1,581cr. OPM is expected to increase by 1 1 bp yoy to 15.9%. Bottom-line is expected to increase by 18.5% yoy to Rs.202cr. We maintain our Neutral recommendation on the stock.
GSK Consumer (CMP: Rs.3,817/ TP: -/ Upside: -)
GSK Consumer is expected to declare its 1 QCY201 3 results tomorrow. We expect the top-line to grow by 8.6% yoy to Rs.883cr. OPM is expected to decline by 89bp yoy to 19.0%. Bottom-line is expected to increase by 7.3% yoy to Rs.142cr. We maintain our Neutral recommendation on the stock.
Marico (CMP: Rs.223/ TP: -/ Upside: -)
Marico is expected to declare its 4QFY2013 results today. We expect the top-line to grow by 21.8% yoy to Rs.1,118cr. OPM is expected to increase by 212bp yoy to 11.1%. Bottom-line is expected to increase by 44.5% yoy to Rs.103cr. We maintain our Neutral recommendation on the stock.
Sanofi India (CMP: Rs.2502/ Target:-/ Upside: -)
Sanofi India for the, 1QCY2013 is expected to post a good set of numbers. The top line will grow by 24.3% to Rs.401cr. The OPM is expected to come to end the period at 14.6%, a decline of 70bps. Inspite, of the same the adjusted Net Profit is expected to grow by 25.0% yoy to end the period at Rs.50.1cr, on back of top-line growth. We recommend a neutral on the stock.
TVS Motor (CMP: Rs.39/ TP: -/ Upside: -)
TVS Motor is scheduled to announce its 4QFY2013 results today. We expect the company to report a healthy top-line growth of ~11% yoy to Rs.1,800cr led by ~15% yoy growth in net average realization driven by higher share of three-wheelers in the product-mix. The total volumes however declined 3.6% yoy during the quarter on account of weak motorcycle (down 4% yoy) and scooter sales (down 16.8% yoy) amidst rising competition and moderating demand environment. We expect the EBITDA margin to remain flat yoy at 6% as increase in other expenditure is expected to be offset by easing raw-material expenses. Nevertheless, bottom-line is expected to decline 8% yoy to Rs.53cr due to higher tax outgo (tax rate expected to be at 22% as against 8% in 4QFY2012). At the CMP of Rs.39, the stock is trading at 6.8x FY2015E earnings. Currently, we have a Neutral rating on the stock.
Economic and Political News
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- Lanco settles legal dispute with Perdaman Chemicals
- BP seeks $1.5 per mmBtu incentive for deepsea gas
- Airtel launches flat roaming rates for African customers
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